[Introduced February 20, 2012; referred to the Committee on
Economic Development; and then to the Committee on Finance.]

____________

A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §11-13CC-1, §11-13CC-2, §11-13CC-3, §11-13CC-4 and §11-13CC-5; and to amend and
reenact §24-2-1j of said code, all relating to creating the
Energy Intensive Industrial Consumers Revitalization Tax
Credit Act; making legislative findings and declaring purpose;
establishing tax credits for suppliers of coal to certain
electric utilities who are subject to the coal severance tax;
establishing a $40 million limit on the tax credits; setting
forth when the tax credits may be taken; setting forth how the
tax credits are calculated and allocated; setting forth how
the payments triggered by the tax credits are to be made;
establishing when the tax credit expires; granting the Public
Service Commission certain authority concerning special rates;
and requiring information on special rates in the Public
Service Commission’s annual report.

Be it enacted by the Legislature of West Virginia:

That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §11-13CC-1, §11-13CC-2,
§11-13CC-3, §11-13CC-4 and §11-13CC-5; and that §24-2-1j of said
code be amended and reenacted, all to read as follows:

This article may be cited as the “Energy Intensive Industrial
Consumers Revitalization Tax Credit Act.”

§11-13CC-2. Legislative findings and purpose.

The Legislature finds that:

(a) West Virginia enjoys a competitive economic advantage
among the states attributable to relatively low-cost electric power
due in considerable measure to an abundance of coal resources,
production from which powers electric generation in the state.

(b) As a consequence, a number of energy intensive industrial
consumers of electric power have located in the state and have
provided jobs for its citizens and an increased tax base that
contributes to the support of schools, other institutions, and
programs that benefit all West Virginians.

(c) As the result of competitive disadvantages emanating from
outside the state and the current state of the national economy,
some energy intensive industrial consumers of electric power have
had to cease doing business in the state or are experiencing or may
experience strains that could threaten their viability and
continued operation.

(d) Conversely, coal production in the state is relatively
stable and is benefitting from demand from coal purchasers inside
the state, outside the state, and outside the country, which demand
has increasingly benefitted the state in terms of its coal
severance tax revenues.

(e) It is in the public interest for the state to assist
eligible energy intensive industrial consumers of electric power
determined to be in need of special rate assistance pursuant to
section one-j, article two, chapter twenty-four of this code, in
order to encourage them to locate, to remain in operation, or to
resume operation, in West Virginia on a long-term basis, by
employing a portion of the coal severance tax revenues to reduce
such industrial consumers’ electric power costs without imposing an
undue burden on electric utilities or their other customers.

(f) In furtherance of its findings, the Legislature’s purpose
in this article is to create a credit, as provided in section three
of this article, against the coal severance tax imposed and levied
under the provisions of subsections (a) and (b), section three,
article thirteen-a of this chapter, of which the primary ultimate
economic beneficiary shall be eligible energy intensive industrial
consumers of electric power determined to be in need of special
rate assistance pursuant to section one-j, article two, chapter
twenty-four of this code.

§11-13CC-3. Amounts of credits; limitations.

Every taxpayer which is a supplier of coal to a West Virginia
electric utility providing a special rate to one or more eligible
energy intensive industrial consumers of electric power pursuant to
section one-j, article two, chapter twenty-four of this code and
which is subject to paying a full five percent tax on the privilege
of severing coal levied and imposed by subsections (a) and (b),
section three, article thirteen-a of this chapter, prior to the
application of any other credits against the tax, shall be entitled
to a credit against that tax in an amount determined by the Public
Service Commission pursuant to section one-j, article two, chapter
twenty-four of this code, subject to the following limitations: (a)
The total credits available to all taxpayers under this section
shall not exceed $40 million in any calendar year; and (b) the
total credits available to any taxpayer in a given calendar year
shall not exceed ninety-three percent of that taxpayer’s tax
liability imposed and levied under subsections (a) and (b) section
three, article thirteen-a of this chapter, so as to preserve
undiminished the seven percent of total coal severance tax revenues
that is apportioned among counties and municipalities pursuant to
section six, article thirteen-a of this chapter. If the full
amount of the $40 million in credits authorized by this section is
not allocated and claimed in any calendar year, during all periods
when a special rate is in effect for any one or more eligible
energy intensive industrial consumers the unused credits may be
carried forward to future years: Provided, That in no event may the
amount of credits allocated and claimed in any single year,
including unused credits that have been carried forward, exceed $55
million dollars: Provided, however, That if in any year the
taxpayers that are suppliers of coal to a West Virginia electric
utility providing a special rate to one or more eligible energy
intensive industrial consumers of electric power entitled to
receive credits pursuant to this section cannot or do not claim
credits in an amount equal to the amount of tax credits designated
by the commission, then the credits may be allocated to and claimed
by any taxpayer that is subject to paying a full five percent tax
on the privilege of severing coal levied and imposed by subsections
(a) and (b), section three, article thirteen-a of this chapter and
that complies with the requirements and procedures set forth in
this section: Provided further, That all unused credits expire ten
years from the effective date of this article: And provided
further, That the credits authorized in this section do not become
available for any purpose prior to the commission’s first approval
of a special rate for an eligible energy intensive industrial
consumer.

§11-13CC-4. Required payments to public utilities.

(a) Each person claiming any tax credit pursuant to section
three of this article shall, as a condition of receiving that tax
credit, make payment equal to ninety-seven percent of the amount of
that credit to the public utility providing electric power to the
special rate customer whose special rate required the funding
generated by that tax credit, as determined by the Public Service
Commission pursuant to section one-j, article two, chapter twenty-four of this code.

(b) Each taxpayer that elects to participate in this tax
credit and required payment program shall notify the State Tax
Department of the West Virginia Department of Revenue of its
election to participate at such time and in such form of
notification as is specified by the tax department. The State Tax
Department shall provide updated notification to the commission of
the identity of taxpayers from which it has received notification
of voluntary participation. This information may be provided to the
electric utilities by the commission for purpose of calculating,
pursuant to subsection (g), section one-j, article two, chapter
twenty-four of this code, the allocated share of tax credits that
are available to each taxpayer, and payments that are required to
be made to the public utility in order to qualify for the tax
credit. Payment to the public utility shall be made no later than
the time at which that tax against which the credit is taken would
have been due and payable to the state under the provisions of
section nine, article thirteen-a of this chapter.

(c) The three percent differential between a taxpayer’s tax
credit and its required payment to the public utility is intended
as an inducement to the taxpayer to participate in the tax credit
and required payment mechanism provided in this article and may be
retained by the taxpayer as compensation for the costs of
administering such participation.

§11-13CC-5. Expiration.

The provisions of this article respecting the generation of
tax credits for new calendar years expires ten years from the
effective date of this article.

(1) West Virginia enjoys relatively low cost electric power
rates for residential customers, business and industry and these
relatively low rates constitute a competitive economic advantage
for West Virginia;

(2) West Virginia has many energy intensive industrial
consumer of electric power, and has the ability to retain its
existing energy intensive industrial consumers of electric power
and attract additional energy intensive industrial consumers of
electric power in the future, through the adoption of policies and
the establishment of rates that enhance and preserve the
attractiveness of West Virginia as a place for energy intensive
industrial consumers to do business;

(3) Energy intensive industrial consumers of electric power
create jobs, provide a substantial tax base and enhance the
productive capacity, competitiveness and economic opportunities of
West Virginia and all of its citizens;

(4) Energy intensive industrial consumers of electric power
help keep power rates low for all consumers of electric power,
including residential customers, by providing a large consumption
base over which the cost of producing electric power may be spread
from time to time;

(5) It is in the best interests of West Virginia, the citizens
of West Virginia, electric public utilities in West Virginia, and
all consumers of electric power in West Virginia, including
residential customers, to encourage the continued development,
construction, operation, maintenance and expansion in West Virginia
of industrial plants and facilities which are energy intensive
consumers of electric power, thereby increasing the creation,
preservation and retention of jobs, expanding the tax base, helping
keep power rates low for all consumers of electric power, and
enhancing the productive capacity, competitiveness and economic
opportunities of all citizens of West Virginia; and

(6) To encourage the continued development, construction,
operation, maintenance and expansion in West Virginia of industrial
plants and facilities which are energy intensive consumers of
electric power, the commission may establish special rates under
this section that in its judgment are necessary or appropriate for
the continued, new or expanded operation of energy intensive
industrial consumers and that can reasonably be expected to support
the long-term operation of energy intensive industrial consumers,
and that do not impose an unreasonable burden upon electric public
utilities or their other customers; and

(7) To assist the commission in the exercise of its authority
to establish special rates under this section, the Legislature
creates in article thirteen-cc, chapter eleven of this code a tax
credit mechanism to provide a source of funding to support special
rates of which the commission may avail itself in exercising said
authority.

(b) As used in this section:

(1) “Energy intensive industrial consumer” means an industrial
facility, plant or enterprise that has a contract demand of at
least fifty thousand kilowatts of electric power at its West
Virginia facilities under normal operating conditions.

(2) “Special rate” means a rate set for an energy intensive
industrial consumer pursuant to this section.

(c) In addition to any authority of the commission to allow
special rates or contracts under any other provision of the code or
rule, and in addition to all other factors which the commission may
consider in setting rates for consumers of electric power,
including, but not limited to the commission’s responsibilities
under subsection (b), section one, article one of this chapter, and
notwithstanding any other provisions of this code to the contrary,
in setting a special rate the commission may take into
consideration fluctuations in market prices for the goods or
products produced by the energy intensive industrial consumer of
electric power, or other variables or factors which may be relevant
to or affect the continuing vitality of the energy intensive
industrial consumer of electric power in dynamic markets. In
setting a special rate by reference to fluctuations in market
prices for the goods and products produced by an energy intensive
industrial consumer of electric power, the commission may establish
variable rates including, but not limited to, ceilings and floors
on the special rate, banking or crediting mechanisms, caps, limits
or other similar types of safeguards that are intended by the
commission, in its reasonable judgment, to provide appropriate
flexibility and predictability in the special rate over time, to
permit the energy intensive industrial customer the ability to make
the capital investments and other commitments necessary to support
the continued operation of the facility.

(d) An energy intensive industrial consumer wishing to apply
for a special rate shall first enter into negotiations with the
utility that provides it with electric power, regarding the terms
and conditions of a mutually agreeable special rate. If the
negotiations result in an agreement between the energy intensive
industrial consumer and the utility, the energy intensive
industrial consumer and the utility shall make a joint filing with
the commission seeking approval of the proposed special rate. If
the negotiations are unsuccessful, the energy intensive industrial
consumer may file a petition with the commission to consider
establishing a special rate. The commission shall have the
authority to establish a special rate upon the filing of either a
joint filing or a petition pursuant to this section.

(e) In order to qualify for a special rate, an energy
intensive industrial consumer shall:

(1) Have a contract demand of at least fifty thousand
kilowatts of electric power at its West Virginia facilities under
normal operating conditions;

(2) Create or retain at least twenty-five full-time jobs in
West Virginia;

(3) Have invested not less than $500,000 in fixed assets,
including machinery and equipment, in West Virginia;

(4) Provide reasonable evidence that due to market conditions
in the industry in which the energy intensive industrial consumer
operates, or other factors bearing on investment in and operation
of the industrial facility or facilities, without the special rate
the operation or continued operation of the industrial facility or
facilities is threatened or not economically viable under
reasonable assumptions and projections regarding the market and the
operation of the industrial facility or facilities;

(5) Provide reasonable evidence that, with the special rate,
the energy intensive industrial consumer intends to operate the
industrial facility or facilities in West Virginia for an extended
period of time, and that the operation or continued operation of
the industrial facility or facilities for an extended period of
time appears economically viable, under reasonable assumptions and
projections regarding the market in which the energy intensive
industrial consumer operates and regarding the operation of the
industrial facility or facilities; and

(6) Provide information and data setting forth how the energy
intensive industrial consumer meets the qualifications of this
section, and how the special rate advances the policy goals set
forth in subsection (a) of this section.

(f) The commission shall determine whether any excess revenue
or revenue shortfall created by a special rate authorized pursuant
to this section should be allocated among any other customers of
the utility. In making that determination, the commission shall
consider all relevant factors, including whether such allocation is
just, reasonable, and fairly balances the interests of other
customers, the utility, and the customer receiving the special
rate.

(g) If the commission determines that: (1) A special rate is
necessary for the creation, preservation or retention of jobs by
the energy intensive industrial consumer; (2) in connection with
the initial special rate that is authorized by the commission for
an energy intensive industrial consumer, the energy intensive
industrial consumer will increase the number of persons it employs,
including both persons who have been previously employed by the
energy intensive industrial consumer and persons not previously
employed by the energy intensive industrial consumer, by at least
one hundred fifty persons as a result of the special rate; (3) the
energy intensive industrial consumer will employ no fewer than
three hundred persons, which number may include, but is not limited
to, the persons newly hired or rehired pursuant to the preceding
clause in this subsection; and (4) a special rate for an energy
intensive industrial consumer of electric power would create a
revenue shortfall which it is not reasonable or equitable to
allocate among a utility’s other customers in its entirety, the
commission may consider the availability of tax credits and
payments required to be made to public utilities pursuant to
article thirteen-cc, chapter eleven of this code to reduce or
eliminate a revenue shortfall. The commission shall identify in
each proceeding in which it establishes a special rate for an
eligible energy intensive industrial consumer the amount of any
unallocated revenue shortfall in need of funding pursuant to
article thirteen-cc, chapter eleven of this code to defray it and
shall project the amount of the gross tax credits needed for that
purpose after taking into consideration the net amounts of such
credits that are required to be paid to utilities pursuant to
subsection (a), section four, article thirteen-cc, chapter eleven
of this code and the limits specified in section three, article
thirteen-cc, chapter eleven of this code. Tax credits authorized
under this section may be designated and claimed only in respect of
periods of time during which the eligible energy intensive
industrial consumer employs at least three hundred persons. The
commission’s determination as to the amount of tax credits on which
it relies in establishing a given special rate, shall constitute an
authorization for each supplier of West Virginia coal to the
utility offering that special rate to claim its allocated share of
such total amount of tax credits. The allocated share shall be
calculated by the affected public utility, subject to the approval
of the commission.

(h) The commission shall include in the annual report to the
Legislature which it makes pursuant to subsection (d), section one,
article one of this chapter a report on the tax credits being
employed pursuant to article thirteen-cc, chapter eleven of this
code to help fund special rates created under this section.

NOTE: The purpose of this bill is to create the Energy
Intensive Industrial Consumers Revitalization Tax Credit Act. The
bill establishes tax credits for suppliers of coal to certain
electric utilities who are subject to the coal severance tax. The
bill makes legislative findings. The bill establishes a $40
million limit on the tax credits. The bill sets forth when the tax
credits may be taken. The bill sets forth how the tax credits are
calculated and allocated. The bill requires that in order to take
the tax credit the taxpayer must make a payment equal to ninety-seven percent of the credit to the utility that provides the
electric power to the special rate customer. The bill establishes
that the tax credit expires in ten years from the date it becomes
effective. The bill grants the Public Service Commission certain
authority concerning special rates. The bill also requires
information on special rates in the Public Service Commission’s
annual report.

§11-13CC-1, §11-13CC-2, §11-13CC-3, §11-13CC-4 and §11-13CC-5
are new; therefore, strike-throughs and underscoring have been
omitted.

Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.